Anxiety disorders are the most common psychiatric disorders among youth, with lifetime prevalence ranging between 18-20% of the general population. Among anxiety disorders, social phobia (SP) affects 8% of all youth, resulting in significant short and long-term impairment, including increased likelihood of substance abuse, limited academic achievement, attenuated occupational functioning, and impaired or missing social relationships. Emerging data suggest that interventions that include social skills training, formal peer generalization sessions, and homework assignments as part of an overall treatment strategy show enhanced efficacy when compared to interventions without these components - the latter two elements which are designed to enhance skill generalization. Two critical treatment elements (peer generalization, homework assignments) are difficult to implement in traditional clinical settings, limiting optimal dissemination to youth in need of these services in different settings (e.g., at school, outpatient, or community facilities). This Phase I STTR, written in response to PA-07-423 Computational Tools for Research in Neuroscience, Behavioral Science and Mental Health, will develop and validate an interactive set of virtual environments to solve the need for intensive behavioral practice opportunities that are critical for skill generalization, thereby enhancing dissemination and providing a model for future efforts. Virtual environments enable the child user to interact with virtual school characters on any standard computer, allowing daily intensive practice of social skills without the need for formal peer group activities (in-clinic solution) or intensive parental involvement (at-home solution).The virtual character responses will be predetermined and preprogrammed yet appear to be responsive to the users interactions, creating a simulated live scenario. This novel and commercially viable intervention with both in-clinic and at-home components will optimize clinical services by promoting the transfer of social skills acquired through traditional social skills training into real-life situations for children through repeated practice in a simulated social virtual environment. Once developed and validated, this marketable resource will enhance treatment dissemination of an evidence-based behavioral intervention to various treatment settings and provide technology readily adaptable for other disorders.